In a short-run production process, the marginal cost is rising and the average total cost is falling as output is increased. Thus, marginal cost is:
A) below average total cost.
B) above average total cost.
C) between the average variable and average total cost curves.
D) below average fixed cost.

Question

Quizplus · Accepted Answer

When the marginal cost is rising and the average total cost is falling, it means that the marginal cost is below the average total cost. This is because the marginal cost measures the change in total cost resulting from producing one more unit of output, while the average total cost measures the total cost per unit of output. As marginal cost is lower than average total cost, it pulls the latter down, resulting in falling average total cost.

In a Short-Run Production Process, the Marginal Cost Is Rising